When it comes to online business, small business is one of the most popular forms of business to get started with. In our article, we would like to briefly introduce you to the advantages and disadvantages of small business.
What is a small business?
First of all, we should explain what a small business is. Every trade is a company in which the operator is self-responsible. Above all, industrial and commercial trades are among the classic commercial enterprises. The small business differs from classic businesses in the legal provisions to be observed. In contrast to other traders, the small business owner does not act in accordance with the provisions of the Commercial Code and other special regulations. The small business is only subject to the provisions of the civil code, the trade regulations and tax and social laws.
It is also important to distinguish between small businesses and small businesses. This term is often mistakenly equated. The small business owner can operate a trade as well as a freelance profession. Accordingly, small entrepreneurs who operate a business are small businesses. Conversely, however, this is not always a prerequisite.
Tip: You can find a more detailed definition of small business in our lexicon .
What are the advantages of a small business?
The small business offers the ideal opportunity to gain a foothold, especially for beginners and part-time workers, as no specific start-up capital is required. Registration is uncomplicated via the trade office. In addition, there is no entry in the commercial register for small businesses.
The small business also has a great advantage when it comes to bookkeeping, as the small business does not have an accounting obligation. This eliminates the need for double commercial bookkeeping and the publication of the annual financial statements.
Another advantage of the small business arises if you want to do this part-time. This allows you to try out your business idea and you continue to be covered by social security through your main employer. Nevertheless, you should always play it safe and inform your employer that you are working on a part-time basis.
Many small businesses often use the small business regulation that applies to small business owners. This takes effect if the annual turnover in the founding year (or, if the company has existed for a longer period, in the previous year) was less than 17,500 euros and does not exceed 50,000 euros in the current calendar year. The advantage that results from the regulation is the elimination of the VAT obligation.
What are the disadvantages of starting a small business?
One of the disadvantages of small business is liability for losing deals. In contrast to the corporation forms GmbH or AG, you are liable for losses with your private assets. In the case of corporations, the partners are only liable to the extent of their invested capital.
Especially for full-time small traders, the company can lead to losses, as no further income is generated. In this case, one should consider whether a corporation is not the better option. For part-time small traders, on the other hand, the small business offers a good opportunity to try out a business idea with little effort and, if successful, to be able to pursue it full-time in the future.
Tip: Also take a look at our checklist on the subject Setting up small businesses and learn how to register your small business step by step!
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